The Federal Reserve is expected to keep interest rates steady at its next meeting on Wednesday, with a 97% chance of no change, according to financial markets. The central bank is likely to pause its recent string of rate cuts and hold the fed funds rate steady at a range of 1.5% to 1.75%. This decision is expected to be driven by the Fed’s desire to assess the effect of its last three rate cuts and to keep inflation at 2% and employment high.
The Fed’s decision to hold rates steady is likely to be influenced by recent economic data, including a hiring slowdown and higher-than-target inflation. However, recent signs suggest that both problems are improving, and the Fed is expected to keep rates flat for at least a few months to see how the economy responds to the rate cuts so far.
The only potential drama at the meeting could occur at the post-announcement press conference, where Fed Chair Jerome Powell will likely face questions about President Donald Trump’s increased public pressure to lower interest rates. Trump has repeatedly called for the Fed to sharply lower interest rates, and the administration has taken legal actions against Powell and Fed Governor Lisa Cook. Powell has denounced these actions as “intimidation” aimed at pressuring the Fed to lower rates.
Economists expect Powell to defend the Fed’s independence and reiterate that there is a higher bar to easing following last year’s insurance cuts. They also expect him to duck most questions about Fed independence and Trump’s demands, and instead focus on the economic factors that drive the Fed’s decision-making.
Overall, the Fed’s decision to hold rates steady is expected to have a positive impact on the economy, as it will allow the central bank to assess the effect of its previous rate cuts and make informed decisions about future monetary policy. The Fed’s independence and ability to set interest rates based on economic factors, rather than politics, is seen as crucial to controlling inflation and maintaining economic stability.